The US stock market has risen about 9% since the election of Donald Trump as US President, with an increase in wealth of nearly $2-T.

The Big Q: Is this the start of a big Bull Market rally?

Investors are euphoric over President Trump’s pro-business/pro-investor policies. But Wall Street is coming to grips with the political reality that gridlock has been the default mode in Washington, DC.

Democrats announced that they are preparing an all-out defense against “Trumpism”. So the market has been cautious in recent weeks, rising on Trump successes and falling into despair when his economic agenda seems bogged down or he pursues bearish policies.

To get a sense of where the market is headed, it’s wise to look at the historical parallel of the early years of another Presidential disruptor: Ronald Reagan.

President Trump can learn from President Reagan’s mistakes and successes.

In the 1.5 yrs of the Reagan administration, the stock market fell. By the Summer of Y 1982 the DJIA, which had been at 1,000, had fallen to below 800. Adjusted for inflation, that was more than a 25% decline in asset values. Some were declaring Reaganomics dead.

Why were the 1st 18 months so negative for stocks and output part of the explanation is that then-Chairman of the Fed Paul Volcker wrung 14% inflation out of the economy, which caused a gut-wrenching recession.

Another big contributor was the delay in the Reagan tax cuts.

Cuts that were supposed to be put in place in Y 1981 were not completed until the start of Y 1983. Worse, there was constant talk of suspending the tax cuts mid-course because of budget-deficit worries, so investors couldn’t even bank on the scheduled tax cuts.

But once the tax cuts were fully phased in, with income tax rates slashed from 70 to 50% and then eventually down to 28% and the capital gains tax slashed from 28% down to 20%, stocks experienced one of the greatest rallies in history.

The market 2X’d under President Reagan, and later, under Bill Clinton, it 3X’d. In Y 1982 the DJIA was at around 800. In 2000 the DJIA was above 10,000. The net worth of all US assets rose from $18 to 60-T.

Most of the market’s recovery under Barack Hussein Obama was the recovery from the Y 2008-2009 collapse. Stocks are not much higher today, adjusted for inflation, than they were 17 years ago. So there is plenty of opportunity for a big, prolonged rally like we saw in the 1980’s and ’90’s.

That begs the Q: What does Trump need to do to ensure this Bull market?

Declare that his tax cuts will be made retroactive to January 1, 2017, so that businesses start investing now.

Immediately suspend the Barack Obamacare investment-tax hike. This would cut capital gains and dividend taxes from 23.8 to 20%, and those lower rates would be capitalized overnight into higher stock values for investors and pensioners.

Do not wait on the tax cuts or the 10% repatriation tax. Demand that Congress enact this agenda in the 1st 100 days. There’s no reason to delay until 2-H of the year. This is making investors nervous that the tax cuts may not happen.

If President Trump does all of these things quickly the corporate tax will be cut in half, investor taxes will be down about 15% and money will flow back to America from a lower repatriation tax. This would be the most bullish change in tax policy since the early 1990’s. And if all that happens, the lower taxes will translate into trillions of dollars of gains for investors and pension funds, with wages and GDP surging, too.

That sounds awfully Bullish to me, how about you?

By Steven Moore

Paul Ebeling, Editor

Editor’s Note: Stephen Moore is a distinguished visiting fellow at The Heritage Foundation, economics contributor to FreedomWorks and author of “Who’s the Fairest of Them All?”

Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.